Tata Steel offsets drop in prices thru higher volumes Second-quarter net profit up 12.5%

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Our Bureau

Mumbai, Oct. 26

TATA Steel Ltd has reported a 12.5 per cent increase in net profit at Rs 1,045.42 crore for the second quarter against Rs 929.58 crore in the year-ago period.

Higher other income at Rs 118.79 crore (Rs 57.04 crore) helped the company report growth in net profit. Net sales moved up to Rs 3,865 crore (Rs 3,738 crore).

Higher volumes and richer product mix also helped the company offset a drop in steel prices, according to Mr B. Muthuraman, Managing Director.

Cost reduction: Tata Steel continued to focus on cost reduction measures to keep its competitiveness up, he added.

Since coal prices have moved up considerably, the company increased the use of its own coal instead of imported coal.

"We also improved our product mix and used the power of branding in the right manner. Therefore, our EBIDTA (gross profit) margins remained unchanged at 45 per cent."

Production, sales up: Steel production during the quarter moved up to 12,09,689 tonnes (10,62,358 tonnes). Sales in volume terms stood at 11,79,605 tonnes (10,20,803 tonnes).

Export turnover edged down to Rs 626.31 crore (Rs 632.80 crore).

For the first half of the current fiscal, net profit rose by 17.57 per cent to Rs 1,969.53 crore (Rs 1,675.07 crore), while net sales were higher at Rs 7,329.62 crore (Rs 6,903.01 crore).

Saleable steel production is expected to be higher in the second half at 2.46 million tonnes against 2.16 million tonnes produced in the first half. Steel prices, according to Mr Muthuraman, would be less volatile going forward.

Tata Steel's focus would be to continue improve product mix, reduce costs by increasing use of domestic coal, and go in for higher use of sinter.

The company would also focus on improving margins in NatSteel Asia Pte, a subsidiary of Tata Steel. The company's scrip ended Rs 3.15 lower at Rs 347.05 on the BSE on Wednesday as the performance was below market expectations.

(This article was published in the Business Line print edition dated October 27, 2005)
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